Jerusalem — Israel approved the expansion of a Jewish settlement in East Jerusalem on Tuesday, drawing criticism from US, British, and Palestinian officials.

On Tuesday, the City of Jerusalem's municipal planning committee approved the construction of 900 more housing units in Gilo. The area in southern Jerusalem is deemed by Palestinians and most of the international community to have been illegally occupied since it was seized by Israel, along with the rest of East Jerusalem, in 1967's Six-Day War.

"I think that additional settlement building does not contribute to Israel's security. I think it makes it harder for them to make peace with their neighbors," President Obama said. "I think it embitters the Palestinians in a way that could end up being very dangerous."

Also Wednesday, Israel bulldozed a Palestinian home in East Jerusalem after its owners failed to get a permit from the municipality.

The Gilo plan will now go through a few months of input, objections, and appeals from the general public, which means that the bulldozers aren't about to level ground yet.

But the very act of pushing such a plan forward has elicited a torrent of criticism from the international community and local peace activists, since it comes at a time when Israeli-Palestinian tensions have edged higher and diplomatic efforts have been faltering.

Eye on annexing settlements

The move to expand Gilo is one of several plans – some proposed but not approved – to build up the southern area of East Jerusalem as a way to connect it to with the Gush Etzion bloc of settlements south of the city. The existing Har Gilo settlement in the West Bank, for instance, is just a few miles southwest of Gilo.

Israeli officials are hoping to annex the settlements – many of which have become bedroom communities of Jerusalem – in any potential peace agreement with the Palestinians. By building more homes nearby, it becomes easier to connect West Bank settlements to Jerusalem, says Haim Erlich of Ir Amim, an Israeli organization that defines itself as working for "an equitable and stable Jerusalem with an agreed political future." The NGO argues against Israel creating "facts on the ground" in Jerusalem, saying that makes it harder to arrive at a just two-state solution with the Palestinians.

"This is the concept that Israel has very been successful with in the past. Not by putting in soldiers or walls, but houses," says Mr. Erlich, Ir Amim's coordinator of policy advocacy. He says that the plan in question, along with another private developer's proposal to build 14,000 housing units just west of Gilo in an area called Walajeh, which straddles the East Jerusalem/West Bank border – is a way to put immovable chess pieces onto the geopolitical board.

"The idea is by putting in these neighborhoods, and by connecting Har Gilo to Jerusalem, this will become one big residential area," he says. "This was part of Ariel Sharon's idea of a 'Greater Jerusalem.' "

"The Foreign Secretary," it stated, "has been very clear that a credible deal involves Jerusalem as a shared capital. Expanding settlements on occupied land in East Jerusalem makes that deal much harder. So this decision on Gilo is wrong and we oppose it."

Successive Israeli governments have balked at suggestions that they curb building anywhere in Jerusalem, including in overwhelmingly Arab parts of the city that were under Jordanian control until 1967. Israel considers it a united whole where its sovereignty shouldn't be questioned. Israeli Prime Minister Benjamin Netanyahu has responded sharply in recent months when the US or other international parties have asked Israel to stop controversial building projects in East Jerusalem.

The city's like-minded mayor, Nir Barkat, casts the issue as one of discrimination. "Israeli law does not discriminate between Jews, Muslims, and Christians, or between eastern and western Jerusalem," he said in a statement. "The demand to halt construction by religion is not legal in the United States or in any other free place in the world. I do not presume that any government would demand to freeze construction in the United States based on race, religion, or gender, and the attempt to demand it from Jerusalem is a double-standard and inconceivable."

Arab villagers' legal action stymied

But in almost every Arab neighborhood, residents say they find it nearly impossible to get building permits from the Jerusalem municipality. Residents often build anyway at risk of demolition.

In the Arab village of Walajeh, half of which is inside Jerusalem municipal boundaries and half of which is in the West Bank, 47 such houses have Israeli demolition orders hanging over them.

One of them is the home of Saleh Hilmi, who is the head of the village council. Mr. Hilmi got together with other residents and, with the help of an Israeli lawyer, put forward a town plan for the village's expansion, in order to legalize the village's own natural growth and prevent the houses in question from being demolished.

But the municipality's planning commission – the same one that just approved the Gilo plan – rejected the plan presented by the Walajeh villagers, on the basis that the area is a designated "green area."

Meanwhile, a private business development company is seeking approval for a plan to build a large Jewish neighborhood in the area with up to 14,000 units, in a plan called Givat Yael. The plan, designed by architect Eli Reches, has not been adopted by any government body, but some in Netanyahu's government – such as Interior Minister Eli Yishai – have already expressed support for it.

Hilmi says the village council members were recently approached "though indirect channels" with an offer: if the people of Walajeh would cooperate with the plan to build Givat Yael, their homes would not be demolished. They refused.

"We rejected it immediately," says Hilmi. "This is our land and we have the deeds from Ottoman times to prove it. They want to expropriate all of this vacant land here," he says, pointing with the sweep of a hand to the green slopes around Walajeh, from which the built-up southern Jerusalem neighborhoods of Gilo and Malha – with shopping mall and technology park – are in plain sight.

"If they build their homes here, that will give them a direct line to the Gush Etzion settlements," he says, "and it will divide us from other parts of the West Bank. We are not going to allow it."